Adding my personal loan to a mortgage

Powellie

Hopefully someone can help.....

I currently own half of a two bedroom flat in Brighton worth £160k (bought for £153k & mortgage remaining is £143k). Mortgage is £400 per mth for myself.

I have a personal loan with HSBC and my monthly repayments are £399 per mth. I also pay £160 per mth B&B as I work away three-four nights per week.

HSBC suggested taking a mortgage out with them and putting the loan onto the repayments which will spread over 25-30 years.

With all these outgoings what is my best option?

Thanks

Powellie

AndrewSmith

I bet they did. Look how long they then get to secure the debt.

It can be right for some people but in just as many cases it is not always the best course of action.

It depends on a number of issues such as loan amount potential saving, how long you intend keeping the property etc.

Don't automatically let them draw you in by the promise of reduced payments as it could cost you considerably more in the long run.

Andy

tomstickland

You'll end up paying back a lot more than the loan. The amount you pay back on any loan with reg payments depends on the interest rate and the number of payments. The more payments then the more time the interest compounds and you pay back loads more. For example, 25 year mortgage you can pay back around 1.9 times what you borrowed. Reduce to a 12 year mortgage and it'll be more like 1.2 times what you borrowed.

Powellie

Thanks for the advice, my aim is to reduce my monthly payments because the £399 for the loan is killing me. I was thinking in investing in another property with my brother and adding the loan onto the mortgage if possible?
Is this an option?

Thanks Powellie

Powellie

Thanks tomstickland for the advice. I have 77 payments left on the loan so over 6 years which is quite a lot. I can manage the payments for now but I won't to get rid of this another way and link it into a property if possible in the future?

TangentMan

Careful about securing more debt on the property. However rather than lump it all into one pot, have you thought about a mortgage with a flexible draw down component (sometimes called reserves). You could use that to pay off your personal loan and then pay off this flexible component at (hopefully) a lower rate (but over a shorter term than the actual mortgage).

To reduce the payments you have to reduce the term but as thomastickland said, this increases the total amount you are paying back.